EU Sustainability Developments Unpacked: European Parliament Confirms Moderated Position on Corporate Due Diligence and Reporting Rules – JD Supra

Executive Summary: EU Regulatory Shift and its Impact on the Sustainable Development Goals

A recent position adopted by the European Parliament on November 13, 2025, signals a significant recalibration of the EU’s sustainability framework, specifically amending the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). This report analyzes the adopted changes, focusing on their direct and indirect implications for corporate contributions to the United Nations’ Sustainable Development Goals (SDGs). The amendments prioritize simplification, competitiveness, and administrative burden reduction, which consequently narrows the scope of corporate accountability and may temper progress towards key SDGs, including SDG 13 (Climate Action), SDG 8 (Decent Work and Economic Growth), and SDG 12 (Responsible Consumption and Production).

Analysis of Regulatory Amendments in the Context of Global Sustainability Targets

Introduction to the Policy Pivot

The European Parliament’s position reflects a strategic pivot from regulatory expansion to consolidation under the EU’s broader Competitiveness and Simplification Agenda. The objective is to rebalance sustainability obligations with economic competitiveness. This recalibration, however, has profound consequences for the enforcement and monitoring of corporate performance against the SDGs. The revised directives raise thresholds for applicability, streamline reporting standards, and modify due diligence requirements, thereby altering the landscape for corporate responsibility in achieving global sustainability targets.

Corporate Sustainability Reporting Directive (CSRD) Revisions and SDG Alignment

Higher Thresholds and the Impact on SDG Data Aggregation

The Parliament’s position significantly increases the thresholds for CSRD applicability, which will have a direct impact on the volume and breadth of sustainability data available for tracking progress on the SDGs.

• Applicability Thresholds: The directive will now apply to companies with over 1,750 employees and €450 million in net turnover.
• Impact on SDG Reporting: This change drastically reduces the number of companies required to report on their sustainability performance. Consequently, this limits the data available to stakeholders, investors, and policymakers for assessing the private sector’s collective contribution to goals such as SDG 5 (Gender Equality), SDG 8 (Decent Work and Economic Growth), and SDG 12 (Responsible Consumption and Production).
• Non-EU Companies: Reporting obligations for non-EU companies will now fall upon their EU subsidiaries or branches, potentially creating gaps in accountability for the global operations of parent companies and their impact on the SDGs.

Value Chain Reporting and its Effect on SDG 12 and SDG 8

The amendments introduce limitations on value chain reporting, which may obscure corporate impacts on human rights and environmental standards within global supply chains, affecting accountability for several SDGs.

• Risk-Based Approach: Companies are permitted to prioritize information collection based on high-risk impacts, which, while efficient, may overlook systemic issues relevant to SDG 12.
• Information Collection Limits: Companies may only seek information from value chain partners that meet the new high thresholds. This “non-solicitation” approach for smaller partners hinders the “trickle-down” effect of due diligence, potentially weakening protections for labor rights (SDG 8) and environmental standards in lower tiers of the supply chain.

Streamlined European Sustainability Reporting Standards (ESRS)

The Parliament endorsed a streamlined version of the ESRS to reduce the administrative burden. While this aligns with principles of efficiency, it must be balanced against the need for comprehensive data to support the SDGs.

The ESRS must now:

1. Ensure interoperability with global standards, which supports SDG 17 (Partnerships for the Goals).
2. Avoid disproportionate administrative burdens, particularly concerning information gathering from suppliers in emerging economies.
3. Be primarily quantitative, which could improve data quality for specific SDG indicators but may fail to capture qualitative impacts.

Corporate Sustainability Due Diligence Directive (CSDDD) Revisions and SDG Implications

Narrowed Scope and its Consequences for SDG 16

The CSDDD’s scope has been substantially narrowed, aligning with the Council’s position and significantly reducing the number of companies subject to mandatory due diligence.

• Applicability: The directive will apply only to firms with at least 5,000 employees and €1.5 billion in global turnover.
• Impact on SDG 16 (Peace, Justice and Strong Institutions): By limiting the scope, the directive’s potential to foster corporate accountability and strengthen governance across a wider market is diminished. Fewer companies will be legally mandated to establish robust due diligence processes to prevent adverse impacts on human rights and the environment.

Due Diligence Approach and its Link to SDG 8 and SDG 12

The Parliament’s position moves away from comprehensive mapping of suppliers toward a more targeted, risk-based scoping exercise.

• Risk-Based Scoping: Companies must identify general areas where adverse impacts are most likely, rather than mapping all direct partners. This approach relies on “reasonably available information” and discourages soliciting information from smaller business partners.
• Implications for SDGs: This limited approach may fail to uncover hidden risks related to forced labor, poor working conditions (SDG 8), and unsustainable production practices (SDG 12) deep within complex value chains.

Deletion of Climate Transition Plan: A Direct Setback for SDG 13

A critical amendment is the complete removal of the mandatory climate transition plan requirement from the CSDDD. This represents a significant weakening of corporate accountability for climate action.

• Impact on SDG 13 (Climate Action): The deletion removes a key legislative tool designed to ensure that large companies develop and implement strategies aligned with the Paris Agreement. This undermines efforts to drive corporate decarbonization and achieve the targets set forth in SDG 13.

Enforcement and Civil Liability

Member States will retain discretion over defining civil liability regimes and penalties. This could lead to fragmented enforcement, challenging the uniform application of standards necessary to uphold SDG 16.

• Maximum Penalty: A proposed maximum penalty of 5% of net worldwide turnover is established.
• Fragmentation Risk: Inconsistent national implementation could create an uneven playing field and weaken the directive’s overall effectiveness in ensuring corporate accountability for adverse SDG impacts.

Strategic Implications and Recommendations for SDG-Aligned Businesses

The revised regulatory landscape requires companies to reassess their compliance strategies, particularly in relation to their public commitments to the SDGs. Even if outside the direct scope, businesses will face indirect pressure through value chain relationships.

Recommended Actions for Companies

1. Conduct SDG-Focused Gap Analysis: Assess compliance not only against the new legal thresholds but also against existing commitments to the SDGs to identify potential accountability gaps.
2. Strengthen Voluntary SDG Reporting: For companies falling outside the new scope, maintaining robust voluntary reporting aligned with global frameworks like the UN Guiding Principles is crucial for stakeholder trust.
3. Review Supply Chain Engagement: Re-evaluate supplier engagement strategies to ensure due diligence practices continue to address risks related to SDG 8 and SDG 12, despite the “non-solicitation” provisions.
4. Integrate Climate Strategy: Despite the removal of the mandatory climate plan, companies should continue to develop and disclose credible transition strategies to demonstrate commitment to SDG 13.

Conclusion

The European Parliament’s moderated position on the CSRD and CSDDD marks a pivotal shift, prioritizing economic competitiveness and regulatory simplification. While this may reduce compliance burdens, it introduces significant challenges for holding corporations accountable for their contributions to the Sustainable Development Goals. The narrowed scope, weakened due diligence obligations, and elimination of the mandatory climate plan place a greater onus on companies to voluntarily uphold and transparently report on their commitments to achieving a sustainable future as outlined by the SDGs.

SDGs Addressed in the Article

• SDG 8: Decent Work and Economic Growth

  The article discusses the Corporate Sustainability Due Diligence Directive (CSDDD), which requires companies to identify and address adverse impacts in their value chains. This inherently includes impacts on labor rights and working conditions, which are central to SDG 8. The “risk-based approach” mentioned for due diligence is a mechanism to protect labor rights and ensure decent work, particularly in global supply chains.

• SDG 12: Responsible Consumption and Production

  This is a core theme of the article. The Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) are tools designed to encourage companies to adopt sustainable practices and integrate sustainability information into their reporting cycles, directly aligning with the goal of promoting responsible production patterns.

• SDG 13: Climate Action

  The article explicitly mentions the proposed “deletion of the mandatory climate transition plan under CSDDD.” While this represents a scaling back of requirements, it directly connects the discussion to corporate strategies for climate action. The broader sustainability reporting framework under CSRD would still require companies to disclose climate-related information, contributing to transparency and action on climate change.

• SDG 16: Peace, Justice and Strong Institutions

  The article details the development of a robust regulatory framework (CSRD, CSDDD) by EU institutions (Parliament, Council, Commission). It discusses enforcement mechanisms, such as oversight by “supervisory authorities,” coordination through a “European network,” and the establishment of a “maximum penalty limit of 5% of net worldwide turnover.” These elements contribute to building effective, accountable, and transparent institutions to enforce corporate accountability.

• SDG 17: Partnerships for the Goals

  The article highlights the importance of aligning the EU’s regulations with global standards. It states that the Parliament explicitly requires ESRS to “Ensure, to the greatest extent possible, interoperability with internationally recognized standards set by global standard-setting initiatives.” This focus on interoperability and alignment with frameworks like the UN Guiding Principles and OECD Guidelines promotes global partnerships for sustainable development.

Specific Targets Identified

1. SDG 8: Decent Work and Economic Growth

   • Target 8.7: Take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking. The CSDDD’s requirement for companies to conduct due diligence on their value chains is a direct mechanism to identify and act upon such human rights abuses.
   • Target 8.8: Protect labour rights and promote safe and secure working environments for all workers. The “risk-based approach” to identifying adverse impacts in the value chain, as described for the CSDDD, is designed to uncover and mitigate risks to labor rights and worker safety.

2. SDG 12: Responsible Consumption and Production

   • Target 12.6: Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle. The CSRD is a direct legislative implementation of this target, mandating sustainability reporting for companies that meet specific thresholds.

3. SDG 13: Climate Action

   • Target 13.2: Integrate climate change measures into national policies, strategies and planning. The EU directives, even in their moderated form, represent a regional policy that integrates climate change considerations into corporate governance and reporting law. The debate over the “climate transition plan” is a clear example of this integration in practice.

4. SDG 16: Peace, Justice and Strong Institutions

   • Target 16.6: Develop effective, accountable and transparent institutions at all levels. The article describes the legislative process involving the EU Parliament, Council, and Commission to create these directives. Furthermore, it mentions that “Supervisory authorities will continue to oversee enforcement at the national level, coordinated through a European network,” which is a direct effort to build effective institutions.

5. SDG 17: Partnerships for the Goals

   • Target 17.17: Encourage and promote effective public, public-private and civil society partnerships. The article’s emphasis on ensuring ESRS have “interoperability with internationally recognized standards set by global standard-setting initiatives” promotes partnership between public regulators (the EU) and global private/multi-stakeholder initiatives to create a coherent global system for sustainability reporting.

Indicators Mentioned or Implied

1. SDG 8: Decent Work and Economic Growth

   • Implied Indicator: The process of conducting a “risk-based approach” to identify adverse impacts in the value chain serves as a qualitative indicator of a company’s efforts to protect labor rights. The article implies that companies must be able to “reasonably explain why they could not obtain relevant information,” suggesting a procedural measure of due diligence.

2. SDG 12: Responsible Consumption and Production

   • Implied Indicator (for Target 12.6.1): The number of companies publishing sustainability reports. The article provides specific, measurable thresholds that define which companies are required to report under CSRD: “companies with more than 1,750 employees and €450 million in net turnover.” These thresholds directly determine the number of companies contributing to this indicator.

3. SDG 13: Climate Action

   • Implied Indicator: The existence and content of corporate climate transition plans. Although the article states the Parliament proposes to “delete the climate transition plan requirement,” its inclusion in the debate makes it a relevant policy indicator. The requirement for ESRS to be “quantitative in nature” also implies the collection of data (e.g., emissions) that would serve as indicators for climate action.

4. SDG 16: Peace, Justice and Strong Institutions

   • Mentioned Indicator: The strength of enforcement mechanisms. The article specifies a clear quantitative indicator: “a maximum penalty limit of 5% of net worldwide turnover” for non-compliance. This serves as a direct measure of the accountability framework’s strength.
   • Mentioned Indicator: The establishment of supporting institutional infrastructure. The proposal for the Commission to set up a “digital platform to provide companies with access to templates, guidelines, reporting requirements” is a concrete indicator of institutional support.

5. SDG 17: Partnerships for the Goals

   • Implied Indicator: The degree of alignment between regional and global reporting standards. The explicit requirement for ESRS to have “interoperability with internationally recognized standards” is a direct, albeit qualitative, indicator of progress towards harmonizing global sustainability efforts.

Summary Table: SDGs, Targets, and Indicators

Source: jdsupra.com